Starbucks Stores to Encourage Retail Sales

For Starbucks, it's all about surviving the onslaught of such competitors as Dunkin' Donuts and McDonald's and finding a new way to extend brand sales. We've watched the coffee purveyor for months as it aggressively pushed into the retail environment, even as it closed stores.

Now, CEO Howard Schultz has made clear what we've expected all along — that Starbucks will increasingly sell itself as a consumer brand on store shelves. His strategy, according to the Wall Street Journal, is "to leverage Starbucks's retail stores to build a stronger consumer packaged goods business." In effect, Starbucks plans to test products in its own stores and then roll out the successful ones to supermarkets.

While Starbucks has sold some beverages, such as the Frappuccino, in supermarkets since 1996, only recently did it take its core coffee product and make it available in stores.

The company introduced Natural Fusions, a line of flavored ground coffee, in June. Previously, Starbucks made Via instant coffee available in supermarkets and retail stores including Target and Wal-Mart. Via has  been a hit with retailers. For example, Diane Dietz, Safeway's CMO, told the Journal that the supermarket chain expects to see double-digit growth for the Via brand "for the next several years."

The company plans to introduce more Via-branded products through the retail channel. Starbucks will also bring to the grocery shelves new Tazo tea products, along with products branded "Seattle's Best," a coffee chain which Starbucks has owned since 2003 but has recently relaunched. Starbucks will use cafes that it has located in some supermarkets and Target stores to sample new products in an effort to get shoppers to buy the products off the shelves.

Schultz promises Starbucks's stores will be the company's anchor, but, he tells the Journal, "We will reward customers who buy Starbucks products in the grocery store with opportunities to get rewards in our stores and vice versa. That's a sea change in our ability to integrate these two channels of distribution."